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Integrity, Experience, Enthusiasm

Distressed Property Sales


Are you or someone you know currently having trouble making your mortgage payment?  We may be able to help you avoid foreclosure, or worse. We specialize in assisting homeowners avoid foreclosure by sellling their home in a "Short Sale".  Chris Highland has a nationally recognized certification, CDPE (Certified Distressed Property Expert), and is trained to help homeowners navigate the difficult waters of the Short Sale transaction.


 

Chris Highland 

The Highland Group with eXp Realty

5457 Twin Knolls Road

Suite 101

Columbia, MD  21054

Cell: 301-401-5119

Broker: 410-777-5714

Chris is a Certified Distressed Property Expert

FAQ's:

 

What is a Distressed Property?  1. For a number of possible reasons, a property that is or will soon be in some stage of the foreclosure process.  2. A property owned by someone who is experiencing a period of financial instability. 3. A property on which the mortgages total an amount higher than the current value and an owner must sell.
 

What is a short sale?    A homeowner is 'short' when he owes an amount on his property that, when combined with closing costs and commission, is higher than the current market value.  A short sale occurs when a negotiation is entered into with the homeowner's mortgage company or companies to accept less than the full balance of the loan at closing.  A buyer closes on the property and the property is "sold short".  A short sale is a process that takes specific paperwork, the short sale package, and it must be done accurately.  This is where the training and experience of the agent make all the difference as to whether your home gets sold.  There is no "short sale magic", just hard work and knowledge.
 

Why would a lender accept a short sale?  One of the most common misconceptions that homeowners have is that their lender is lying in wait to seize their house.  Nothing could be further from the truth.  Banks are in the business of lending money, not the real estate business, and they don't want to own your house.  The fact is a foreclosure has far-reaching financial and regulatory consequences that most people are not aware of.  A foreclosure involves months of utilities, maintenance, interest loss, taxes, insurances, staffing costs...and not least of all legal fees.
 

I've heard short sales are complicated and can take months, but still not work out?   Short sales are different than traditional sales.  There is a process that must be followed.  The reason so many don't work out is that so few realtors are trained to handle short sales correctly.  Banks, as well, are overwhelmed with the sheer number of distressed properties; they are understaffed and ill-prepared.  In Maryland, in 2007 only 1 in 31 short sales actually made it to closing.  As the number of short sales has grown over the last few years, banks are gradually seeing the benefit of short sales over foreclosures, and are becoming more cooperative with the short sale process.  Recent legislation to create standards for the short sale process has helped enormously to speed up the transaction. Currently 9 in 10 short sales are successful.
 

Why is a short sale an advantage to me as a distressed property owner?  Going through the foreclosure process is  quite possibly the most devastating financial and emotional process a homeowner or family can go through.  Credit scores can be lowered by 300+ points and foreclosure is the most devastating credit issue you can have in relation to future credit availability.  If you successfully sell your house in a short sale, the deduction on your credit score is significantly less, and can be repaired.

What a short sale is not:  A short sale is a way to avoid foreclosure, not a way to get out of a mortgage.  A seller must demonstrate a valid financial hardship for why he or she cannot pay their mortgage.  There are very specific requirements. 

 

If you think you might be in danger of foreclosure, call or email us, we can help.

 


Short Sale Information


SHORT SALES - ARM'S-LENGTH TRANSACTION

A buyer recently asked us asked how she would go about buying her brother’s house which was a short sale. We had to tell her its not possible. A short sale must be an arm’s-length transaction. An arm’s-length transaction is one which must take place between parties that have no familial or business connection.

The question of conflict of interest is the issue, because the parties to a transaction must be independent. Many lenders are requiring buyers to sign arm’s-length transaction affidavits if they purchase is a short sale.

 

WILL A LOAN MODIFICATION STOP FORECLOSURE OF MY FREDERICK HOME?

If your Mortgage holder offers a loan modification program, it could be an excellent way to avoid foreclosure. There are, however, some stipulations. The homeowner must have the means to continue to pay the mortgage. This option is feasable only if the problem that caused you to fall short in the first place is corrected.

A loan modification is similar to a lower interest refinance where the lender lowers the interest rate on the loan, thus lowering the payment. You must qualify by sending in proof of income and expenses. Some lenders are becoming more reasonable about alternatives to foreclosure, since the numbers are continuing to increase.

 

AM I ELIGIBLE TO SELL MY HOME IN A SHORT SALE?

There are record numbers of homes being sold as a short sale in today's real estate market. Short sales have been done for years, just not in the numbers that we see today. A Short Sale is when a seller negotiates with their lender and gets them to allow the home to be sold for an amount "short" of what is owed. In most cases, the bank write's off their loss, but in some cases the seller is charged a deficiency, on which they must make payment arrangements. Banks don't like short sales, but they don't like foreclosure more. You may be able to avoid foreclosure by a short sale.

If you are in a distressed situation, you may be a candidate for a short sale. You must document and prove to your lender that you are unable due to financial hardship to pay your mortgage. If you want to keep the Mazarotti and dump the mortgage, you probably are not in a hardship.

You must have gone through a hardship such as job loss, divorce, or some kind of income loss to qualify. You have to get in touch with your lending representative, fill out the neccessary paperwork and provide the documentation they ask for. When you list your home, you have to list at market value for a certain amount of time, to prove that the home won't sell for market value.


What Are Your Options? How to Stop a Home Mortgage Foreclosure


Usually when clients call us regarding our services, they have missed a few payments and they are in various states of the foreclosure process. We try to explain what can be done to fight. They are only a few options and here is a quick list:
 

1. Reinstatement-This where the homeowner reinstates the mortgage by paying up all missed payments and fees and becomes current with the mortgage. After all the fees have been payed up then the homeowner can continue to pay the mortgage payments as they had.

2. Forbearance-More commonly known as a re-payment plan. Allows the homeowner to negotiate a re-payment of missed payments and fees to reinstate the mortgage.

3. Sell The Property-If there is equity in the property then the home can be sold and the foreclosure can be "cured" thus avoiding the foreclosure.

4. Rent The Property-The property can be rented however the mortgage must be made current. A rental agreement will not stop the foreclosure process.

5. Refinance-If the credit rating hasn't been too badly damaged, a refinance may help especially if the monthly payments can be reduced. The recent bail-out from the Federal Government may enable some homeowners who qualify to refinance.

6. Deed-in-Lieu of Foreclosure-Commonly known as the friendly foreclosure. This involves for the bank to agree to foreclose and take the property back without the lengthy process. This is not recommended for properties with equity because the owner gives up the right to the property and any equity. This option is technically still a foreclosure and will show up as such on your credit report. Sometimes the bank will forgo any other recourse but that will also have to be negotiated.

7. Bankruptcy-Can not avoid the foreclosure but may allow the owner to reorganize debt. It rarely stops a foreclosure it usually only stalls it. Another drawback is that it makes it difficult to sell the property and almost impossible to negotiate with any third parties.

8. Short Sale-When the homeowner owes more than the property is worth, a sale can be negotiated and an approval obtained from the bank to accept an amount less than is owed.

Most of these options involve negotiation with the bank and a decent credit rating. If the credit has been affected already, then the only real option that can help is the short sale. In our experience when homeowners use the other options available, they wind up in the same predicament a fews months down the road because the underlying cause of their situation was never resolved.

Also you must know-there are only two things that follow you for the rest of your life, a felony conviction and a foreclosure. True, after 10 years it will drop off your credit report, however almost every lending institution will ask-Have you ever had a foreclosure? If you've had one you must answer yes, answering no could be considered fraud.


A Brief History of Current Market Trends


How did we get to the kind of market where in some neighborhoods  as much as 30% of the listings are short sales?  The answer, in short, is the Sub-Prime lending market from the last decade.  Sub-Prime is the marketing term used by the industry for high-risk loans, also known as the 'B-paper' market. 
 

The availability of funds through these types of loans to potential buyers, who could not have previously qualified for a loan, grew larger than at any time in history.  (It is now coming to light that many borrowers over 60%, could have afforded a home through traditional loan products, but were incented to use subprime loans.  You can guess why -- the lenders were paid higher premuims to get people into these loans.)
 

This increase in purchasing power drove prices up with appreciation rates also never seen before.  In turn, the rapid appreciation of the real estate market created a new category of homeowner - the invenstor.  The National Association of REALTORS reported that in 2005 40% of home purchases were investments or second homes.
 

This unprecidented lending frenzy has caused a number of conditions that we are now facing:  In many areas property values have plummeted. Home sales have continued to slow, causing real estate inventories to reach the largest inventory in 22 years. In 2005 foreclosure rates increased on a quarterly basis all 4 quarters of the year.  In 2006 there were a total of 1.2 million foreclosure filings, and in the first half of 2007 foreclosures were up 55% over 2006. Since the end of 2006, according to www.ml-implode.com, 266+ 388 major US lending institutions have closed their doors...including the latest casualty, Indymac, 4th largest lender in the country. By November 2007 over 63% of the sub-prime mortgages once available have disappeared. This number continues to increase.